Focus of Chevron-Ecuador Litigation Shifts to Court Systems World-Wide

The major players have now all spoken in Chevron’s high-stakes litigation battle against plaintiffs who seek to enforce an $18.2 billion judgment issued by an Ecuador court based on charges that Chevron is responsible for environmental damages in the Ecuadorean Amazon.  The action is now likely to shift to court systems around the world, where plaintiffs have vowed to attempt seizure of Chevron assets to collect on the judgment.  One can only hope that in the interests of preserving the rule of law, those court systems will rebuff enforcement efforts based on overwhelming evidence that the judgment was the product of a massive fraud.

Soon after the Ecuadorean judgment was issued early last year, Chevron took its case before a federal judge in New York.  After an extensive hearing, the judge issued preliminary findings that both the plaintiffs and their lawyers had defrauded and corrupted the trial court in Ecuador.  Among the judge’s findings:

  1. The plaintiffs submitted “environmental assessments” to the Ecuador court under the name of Dr. Charles Calmbacher, but Dr. Calmbacher disavowed having prepared the reports or espousing the views expressed therein;
  2. They blackmailed the trial judge to appoint Dr. Richard Cabrera to conduct an “independent” assessment of environmental issues;
  3. They ghost-wrote Dr. Cabrera’s “independent” assessment, but concealed that fact from the court and Chevron;
  4. When Chevron learned the source of Dr. Cabrera’s report, the plaintiffs purported to compile new, “cleansed” expert reports for the court – but those who compiled the reports never visited Ecuador but rather relied solely on the findings in Dr. Cabrera’s fraudulent report;
  5. They intentionally sought to intimidate Ecuadorean judges, including efforts to convince judges that they might be killed if they ruled in favor of Chevron; and
  6. They pressured prosecutors to bring criminal charges against Ecuadorian attorneys who had represented Chevron.

Although the U.S. federal courts ultimately ruled that they lack jurisdiction to issue orders preventing courts in other countries from enforcing the Ecuadorean judgment, the district court retains jurisdiction over Chevron’s lawsuit for damages, and the district judge seems unlikely to reconsider his previous finding regarding the fraudulent nature of the Ecuador proceedings.

Also seeing things Chevron’s way is a panel of three arbitrators, convened under the authority of the U.S.-Ecuador Bilateral Investment Treaty (BIT) and administered by the Permanent Court of Arbitration at The Hague.  Earlier this month, it ordered Ecuador to prevent enforcement and recognition of the $18.2 billion judgment, both within and without Ecuador.  It ordered the Ecuador courts not to take any steps that would cause the judgment to become enforceable.  And today, the artibrators ruled that they have jurisdiction to hear Chevron’s claims against Ecuador for any damages it incurs in connection with the judgment.

The Ecuador courts have shown no signs of backing down, however.  In January, an appellate court in Ecuador affirmed the massive judgment.  And in a decision made public on February 21, the appellate court said that the BIT panel had no authority to interfere with court proceedings in Ecuador.  Also, although it referred Chevron’s latest appeal to the Ecuador Supreme Court, the appellate court rejected Chevron’s request that the posting of an appeal bond be waived, and it held that in the absence of a bond, the judgment could be enforced immediately.  Counsel for the Ecuador plaintiffs responded by indicating that they will initiate steps to collect the judgment in courts throughout the world.

It is difficult to predict accurately how courts around the world will respond to those enforcement efforts.  But any court that purports to adhere to the rule of law will have a difficult time ignoring the findings of a federal judge in New York that the $18.2 billion judgment was the product of a massive fraud – as well as the order from the BIT panel that Ecuador is required to “take all steps necessary to suspend” enforcement of the judgment.  Moreover, both the Ecuador plaintiffs and their lawyers continue to be subject to the jurisdiction of the New York court.  They cannot expect the New York judge to look kindly on any role they play in efforts to enforce a judgment that the New York judge determined was the product of their own fraud.

Related Legal Pulse post: Second Circuit Ruling: All Is Not Lost for Chevron in Ecuador Battle

2 thoughts on “Focus of Chevron-Ecuador Litigation Shifts to Court Systems World-Wide

  1. karen hinton

    As with most things in life, there is another side. First, Chevron’s allegations are just that — allegations that no U.S. court has ruled on. Second, the Ecuador court — the court Chevron asked to hear the case in the first place — did look at the evidence and found Chevron guilty of massive contamination.

    Third, the Ecuador court also found that Chevron conducted a phony remediation of a small number of well sites in an attempt to convince a U.S. court to dismiss the original lawsuit, filed in New York federal court. A U.S. appellate court allowed the case to be moved to Ecuador, at Chevron’s request, with the condition that Chevron accept Ecuadorian jurisdiction. Once the trial got underway and evidence clearly showed Chevron’s culpability, the oil giant screamed “fraud” and turned back to the U.S. court system for comfort. It temporarily found some with Judge Kaplan, but the U.S. Second Circuit Court of Appeals reversed Kaplan on every count, basically saying he had no jurisdiction and back off.

    Now Chevron is in search of another friendly court in the form of an arbitration panel, composed of private arbitration lawyers. Without hearing from the Ecuadorians or reading one legal brief prepared for them in their defense, this panel has instructed the government of Ecuador to block enforcement of the $18 billion judgment, based on Chevron’s false charges. In response, Ecuador has said its Constitution, like the U.S. Constitution, will not allow for such interference. So I will close, using many of the same words as Mr. Samp. No court that purports to adhere to the rule of law will look kindly on Chevron’s arbitration panel that has demanded Ecuador violate its Constitution. We have an enforceable judgment, and we intend to enforce.

    Karen Hinton, U.S. spokesperson for the Ecuadorian plaintiffs

    1. 1) Chevron never asked the courts of Ecuador to hear this case. Indeed, Chevron never conducted business in Ecuador. It was brought into this suit only after it acquired a controlling interest in Texaco, which remains a separate corporation.

      2) It is not correct that “no court has ruled on” Chevron’s allegations of fraud. Judge Kaplan made detailed factual findings that Chevron was likely to succeed on its claims that the Ecuador plaintiffs and their lawyers engaged in a massive fraud. The Ecuador plaintiffs will have an opportunity to request that Judge Kaplan reconsider those findings when the case comes up for trial, but it would take a lot of evidence (which the Ecuador plaintiffs to date have not presented publicly) to get him to change his mind.

      3) The Second Circuit did not hold that Judge Kaplan lacked jurisdiction. It held that he lacked authority to issue an injunction against efforts to enforce the Ecuador judgment in courts around the world. But the appeals court allowed Chevron’s racketeering claims against the Ecuador plaintiffs and their lawyers to proceed.

      4) Ms. Hilton states that the Ecuador plaintiffs intend to proceed with efforts to enforce their judgment in courts around their world, despite an order from an international arbitration panel that they not do so and despite Judge Kaplan’s findings that their judgment was the product of a massive fraud. As I stated in my original post, Judge Kaplan (who maintains jurisdiction over the Ecuador plaintiffs) is unlikely to look kindly on such activity.

Leave a Reply

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s